RPT-Fitch Affirms CIF Euromortgage's OF at 'AA+'/Stable
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Oct 7 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has affirmed CIF Euromortgage's Obligations Foncieres (OF) at 'AA+' with a Stable Outlook.
KEY RATING DRIVERS
The rating action follows a review of the programme and a re-calculation of the breakeven over-collateralisation (OC) level for the 'AA+' rating to 6.5%, below the current committed OC level of 8.3%.
CIF Euromortgage's OF cover pool included 11.2% of substitution assets made up of intra-group exposures as of end-June 2013. Fitch did not model any loss on such assets in an 'AA+' rating scenario, as they are guaranteed by the French State (AA+/Stable). The French government has provided a guarantee to intra-group exposures of the CIF group as part of extraordinary support measures to facilitate an orderly wind-down of the bank. Although the guarantee expires in November, Fitch expects support to continue to be provided. However, should such support no longer be provided, Fitch would review the effect of such removal on the breakeven OC needed to support the programme's rating.
The OF's rating remains credit-linked to the 'AAAsf'/Stable rating of the class A units issued by CIF Assets 2001-1, which represent 76.3% of CIF Euromortgage's cover pool and is backed by a pool of French residential loans originated by Caisse Centrale du Credit Immobilier de France (A/Stable).
Since the group stopped originating new loans in September 2012, Fitch considers the OF programme to be in run-off mode. Consequently the agency relies, in its analysis, on the issuer's public statement to maintain an OC of 8.3% rather than on the lowest level of OC observed over the past 12 months.
The fact that the programme is in run-off mode is also taken into account in Fitch's discontinuity risk analysis for the programme and is reflected via the 'Moderate high' risk assessment for the cover pool specific alternative management. This, together with a 'Moderate high' assessment for the programme liquidity gap and systemic risk, drives Fitch's Discontinuity Cap (D-Cap) of 3 (Moderate high) for the programme. The other D-Cap components (asset segregation, systemic cover pool management and privileged derivatives) were assessed as 'Low' from a discontinuity risk perspective.
Based on this D-Cap of 3 and the 'A' Issuer Default Rating (IDR) of Credit Immobilier de France Developpement (CIFD), CIF Euromortgage's parent, which Fitch uses as a reference IDR for this programme, the rating of CIF Euromortgage's OF can be as high as 'AA' on a probability of default basis. It could reach up to 'AAA' after factoring in recoveries, but the exposure to the French State and the level of committed OC limit the rating of the OF to 'AA+'.
The OF rating would be vulnerable to downgrade if any of the following occurs: (i) CIFD's LT IDR, which acts as a reference IDR for the OF's rating, is downgraded; (ii) a downwards review of the current Discontinuity Cap (D-Cap) of 3 (Moderate high discontinuity risk); (iii) a drop in the OC below Fitch's breakeven level for the rating; (iv) a downgrade of class A units issued by CIF Assets 2001-1 to below 'AA+sf'; or (v) a downgrade of France below 'AA+'.
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